Bitcoin: The Future or Ponzi Scheme?

To me Bitcoin seems like the moterlode of all bubbles/Ponzi schemes. People are getting into it primarily it seems not to actually buy and sell goods and services, the primary function of a currency, but to make money from the currency itself.

The idea that 1 BTC = $13,000 or whatever it is at the time you read this is just absurd. Some people are making a fortune but many are going to lose it when the whole system collapses.

Originally Posted by Ominous Gamer

Being upset is understandable, but be upset at yourself for poor planning, not at the world by acting like a spoiled bitch during an interview.

To me Bitcoin seems like the moterlode of all bubbles/Ponzi schemes. People are getting into it primarily it seems not to actually buy and sell goods and services, the primary function of a currency, but to make money from the currency itself.

The idea that 1 BTC = $13,000 or whatever it is at the time you read this is just absurd. Some people are making a fortune but many are going to lose it when the whole system collapses.

Partially agree however until BTC faces real competition from other currencies like it, it will serve a use for a lot of 'gray' markets which means I don't think the value is going to absolutely crater even with a correction.

I think we're at the point where there's a bubble, most people know there's a bubble, but nobody wants to get out too early. A lot of the rise is because of all the new entrants from all the recent bitcoin news.

Isn't it possible it's a bit of both? I think it's eminently clear that the basic idea of a blockchain and trustless payments is a pretty big deal - big financial companies are looking into implementing something like that for settling payments (our current payments system is ridiculously outdated). The technology underlying bitcoin and other cryptocurrencies is indeed likely to have fairly profound impacts on our financial system, possibly the broader economy. I am just less than convinced that the specific implementation of this technology as a cryptocurrency (or, at least, these cryoptocurrencies) merit their rather exorbitant valuations. It's pretty obvious that this has veered rather far into bubble territory, and the similarities to tulips and other similar bubbles are hard to ignore - especially the difficulty in determining a rational valuation for the underlying item being traded. But I don't think it's fair to dismiss them as irrelevant.

"When I meet God, I am going to ask him two questions: Why relativity? And why turbulence? I really believe he will have an answer for the first." - Werner Heisenberg (maybe)

They clearly have a niche use. But that doesn't begin to justify the current price nor the rapid increase to this price level.

It's not really niche - if the entire financial industry switches to trustless settlements, that's a pretty big deal. And that's just the obvious parallel to cryptocurrencies. There's scope to use blockchains for supply chain management, EMRs, even some government tasks like collecting VATs or other transaction-based taxes. I think the technology underlying cryptocurrencies may in fact have wide-ranging uses once people figure it out. It might not be 'disruptive' per se - mostly it's just a better way of enabling some sort of transaction or recordkeeping that used to be cumbersome - but it certainly has the potential to be important.

That's why I kinda see the comparison Wraith makes to the dotcom boom. A lot of those companies had products that were never going to make money and they were bid up to unreasonable prices without any understanding of the business fundamentals. But the technologies they were based on - and that they were in the process of developing - went on to fundamentally change the global economy, and eventually produced companies that did indeed have wildly profitable products. So I think it's fair to argue that the technology underpinning cryptocurrencies is indeed important and valuable, even if the specific application and iteration of it as a cryptocurrency may end up fleecing a lot of people. And it's even possible to argue that while they're almost all overvalued now, some cryptocurrencies might end up being decent investments in the future, much as was the case with a minority of dotcoms in the 90s (and many in the 2000s).

The analogy breaks down when you realize that cryptocurrencies aren't a 'product' per se in the way that dotcom companies ostensibly were selling. It's modeled as a currency that is roughly analogous to a forex version of gold that has no storage costs. In that context it's challengin to understand bidding it up past any reasonable approximation of its value when there's no underlying return - it's just a consensus store of value, and the volatility and poor governance make it very hard to fathom why someone would actually desire to use it as a store of value.

So: the technology underpinning it has some comparisons to the dotcom boom, though likely not quite as momentous, but the 'product' itself might be more akin to a tulip bubble where there is no underlying value to drive price discovery.

"When I meet God, I am going to ask him two questions: Why relativity? And why turbulence? I really believe he will have an answer for the first." - Werner Heisenberg (maybe)

Bitcoin doesn't have a monopoly on this technology. So the main uses for this technology are unrelated to the availability or price of bitcoin. The niche I was referring to was illicitly transferring funds. It has a clear use for criminal elements, but also governments trying to bust sanctions, and individuals who operate in areas without ready access to currency.

Most promising crypto assets should not be thought of as currencies. The underlying value in bitcoin's case, for example, is the value of its decentralized payment processing network which has all the advantages of blockchain technology. Other crypto assets have other foundations for their value. While it is difficult to deny that bitcoin has all the characteristics of a speculative bubble, the value of bitcoin--like other crypto assets--is also dependent on network effects. Bitcoin doesn't have a monopoly on blockchain technology, but it is unchallenged within its actual niche.

“Humanity's greatest advances are not in its discoveries, but in how those discoveries are applied to reduce inequity.”
— Bill Gates

Bitcoin doesn't have a monopoly on this technology. So the main uses for this technology are unrelated to the availability or price of bitcoin. The niche I was referring to was illicitly transferring funds. It has a clear use for criminal elements, but also governments trying to bust sanctions, and individuals who operate in areas without ready access to currency.

I think it's an open question whether the majority of bitcoin assets are held by people who want to use it in this manner. While I don't deny that this seems to be a major use of it *as a currency*, and that's problematic to say the least, I question whether that is what is driving pricing or constitutes a big part of bitcoin assets (though it might indeed constitute a decent percentage of the *transactions*). Most people view it not as a currency, but a speculative asset - they're banking on other people (essentially criminals of one sort or another) finding value in bitcoin in the future, so they're pouring money into it now. In fact, I'd bet most don't even view it the way I do (as essentially gold); I think they're not even thinking of this as a 'flight to safety' kind of move, but a purely speculative one.

I don't really think we disagree here - AIUI we both think that bitcoin pricing is ridiculous and in no way related to its actual value. But I think there's a kernel of innovation in there that is the reason for the justified excitement about it, even if this particular instantiation of the technology has little to recommend it. It's too easy to dismiss bitcoin as a fad, and while I agree that bitcoin is a fad, I don't think the technology that underpins it is irrelevant in the slightest. In fact, I'm pretty sure it and its descendants will have profound impacts on our society.

"When I meet God, I am going to ask him two questions: Why relativity? And why turbulence? I really believe he will have an answer for the first." - Werner Heisenberg (maybe)

Information about bitcoin is currently dominated by the speculative bubble discussion, but there's a lot of very interesting material out there about the development of blockchain-based technology eg. in the form of smart contracts and alternative digital tokens. Discussions about various Ethereum apps are especially interesting. Here's an article about one approach to building a blockchain-based prediction market that seeks to not only predict future outcomes but to also provide a verified and permanent record of outcomes: https://www.wired.com/2017/03/forget...oday-tomorrow/

The challenges that arise from the meeting between prediction markets and blockchain are very interesting. How much would the best prediction markets be worth?

“Humanity's greatest advances are not in its discoveries, but in how those discoveries are applied to reduce inequity.”
— Bill Gates

Bitcoin is a bubble primarily because of lack of liquidity, if any holder of consequence tries selling their bitcoins the rate will take a major hit. The growth is fueled by miners who sell all they mine immediately, however as it becomes longer and longer to mine it further reduces the amount of available bitcoins driving the price up while the hype is still running strong.

On the other hand it is an attractive instrument for transactions when you want to avoid the financial institutions that have been strangled by regulation making it extremely difficult to operate even a legitimate business. The speculative hype is actually hurting this aspect of the money as the volatility makes it very difficult fix prices in bitcoins.

Not that I am not biting my nails for not skipping a meal in a restaurant an buying a few hundred bitcoins some years back or even mining them on my gaming pc when it was possible

Bitcoin is a bubble primarily because of lack of liquidity, if any holder of consequence tries selling their bitcoins the rate will take a major hit.

and thats why bitcoin will eventually be surpassed by a cryptocurrency with better planning. Only 1000 people own about 40% of bitcoin. The Winklevoss twins are "bitcoin billionaires." One person owns 7% off all bitcoin, about $15 billion, and while people have convinced themselves that those bitcoin are lost, all its going to take is a single transaction from that closely watched wallet and the entire bitcoin economy collapses.

"In a field where an overlooked bug could cost millions, you want people who will speak their minds, even if they’re sometimes obnoxious about it."

Been following this and its competitors due to their relevance to another project. There was a crowdsale that ended today and it'll be very interesting to see if their forecast of a million tickets sold next year proves accurate. Still looks like the strongest competitor for this niche, esp. in Europe, and the market is both huge and largely untapped.

“Humanity's greatest advances are not in its discoveries, but in how those discoveries are applied to reduce inequity.”
— Bill Gates

I still don't get it. If crypto currencies (or digital tokens, or block-chain technologies, or whatever) are all still tied to real currency, then why isn't bitcoin just another big money scam, or money laundering?

Want to increase company value on the open market? Just change your name to something blockchain. At least, that worked for the Long Island Iced Tea Corp after changing its name to Long Blockchain Corp.

In what is the most 2017 thing ever, company shares soared by as much as 500 percent in pre-market trading this morning after the company announced the name change, settling back to about a 275 percent gain.

Shares of Eastman Kodak more than doubled after the company waded into the digital-currency world with plans to launch an initial coin offering.

Kodak on Tuesday said the coin, KodakCoin, would be the backbone of a new platform that will help photographers license their work and track the unlicensed use of their images. The coin uses the technology behind bitcoin, called blockchain, to keep a digital ledger of the photographs.

In an initial coin offering, a firm creates its own bitcoin-like digital token and offers it publicly for sale. The token is usually designed to unlock some service on an online platform, like with Kodak’s project.

“For many in the tech industry, ‘blockchain’ and ‘cryptocurrency’ are hot buzzwords, but for photographers who’ve long struggled to assert control over their work and how it’s used, these buzzwords are the keys to solving what felt like an unsolvable problem,” said Kodak CEO Jeff Clarke in a statement.

Kodak’s foray into crypotcurrencies boosted shares 119% on Tuesday and put the company’s market value at $290 million, according to FactSet. More than 65 million shares changed hands on the day, and the stock soared another 46% in after-hours trading.

Since emerging from bankruptcy protection in 2013, its highest-volume day before Tuesday occurred when 2.15 million shares changed hands, according to FactSet. Even with Tuesday’s rise, Kodak is down more than 50% over the last 12 months. The company has struggled to adapt to new technology in recent years.

For the past several years, people have been experimenting with ways to use blockchain. At its essence, blockchain is an open record of transactions, maintained in an online ledger that is distributed across a network of computers, that cannot be tampered with. That makes it like an indelible time stamp, which could be useful in a case of copyright and digital-rights management.

By Erik Holm and Paul Vigna
Jan 9, 2018 4:46 pm ET
0 COMMENTS
Shares of Eastman Kodak more than doubled after the company waded into the digital-currency world with plans to launch an initial coin offering.

Kodak on Tuesday said the coin, KodakCoin, would be the backbone of a new platform that will help photographers license their work and track the unlicensed use of their images. The coin uses the technology behind bitcoin, called blockchain, to keep a digital ledger of the photographs.

In an initial coin offering, a firm creates its own bitcoin-like digital token and offers it publicly for sale. The token is usually designed to unlock some service on an online platform, like with Kodak’s project.

The logo for the KODAKOne image rights management platform.
The logo for the KODAKOne image rights management platform. PHOTO: EASTMAN KODAK
“For many in the tech industry, ‘blockchain’ and ‘cryptocurrency’ are hot buzzwords, but for photographers who’ve long struggled to assert control over their work and how it’s used, these buzzwords are the keys to solving what felt like an unsolvable problem,” said Kodak CEO Jeff Clarke in a statement.

Kodak’s foray into crypotcurrencies boosted shares 119% on Tuesday and put the company’s market value at $290 million, according to FactSet. More than 65 million shares changed hands on the day, and the stock soared another 46% in after-hours trading.

Since emerging from bankruptcy protection in 2013, its highest-volume day before Tuesday occurred when 2.15 million shares changed hands, according to FactSet. Even with Tuesday’s rise, Kodak is down more than 50% over the last 12 months. The company has struggled to adapt to new technology in recent years.

For the past several years, people have been experimenting with ways to use blockchain. At its essence, blockchain is an open record of transactions, maintained in an online ledger that is distributed across a network of computers, that cannot be tampered with. That makes it like an indelible time stamp, which could be useful in a case of copyright and digital-rights management.

Initial coin offerings are a relatively new phenomenon that exploded in 2017, raising more than $4 billion last year, though regulators like the Securities and Exchange Commission have warned about the risks and have shut down some egregious malefactors.

Kodak is the latest company to see its shares soar after publicizing plans to explore the world of bitcoin, blockchain and initial coin offerings. On Tuesday, Kodak’s shares climbed $3.70, or 119%, to $6.80.

Others getting into the area include a former electronic cigarette company, a biotech firm, and an entity formed last year through a reverse merger with a sports-bra maker.

A company that owns several burger restaurants, Chanticleer Holdings, saw its shares rise more than 40% on Jan. 2 when it announced that it would use blockchain technology to provide a currency for its customer loyalty programs. A firm formerly known as Long Island Iced Tea managed to avoid getting its shares delisted after it changed its name to Long Blockchain Corp. last month and said it was pivoting to investing in blockchain technology.

Sometimes, even rumors are enough to send a company’s shares higher. Western Union and Seagate Technology PLC have both popped in the past few days after little-known websites claimed the companies had ties to a digital currency called ripple. Western Union and Seagate didn’t respond to a request for comment. Ripple, the company, declined to comment.

Kodak’s initial coin offering will begin on Jan. 31 and is open to accredited investors from the U.S., U.K., Canada and other select countries. Kodak joined with WENN Digital, which created the KodakOne platform and the KodakCoin cryptocurrency.

A lot of altcoins have absolutely no reason to have value, and are where they are on pure speculation. Dotcoms in 2000 keeps working better and better as an analogy, and they're like all the startups that suddenly sprang into existence back then to capitalize on the craze. But just like back then, there are also coins that actually do have a point and a good chance at lasting.

The feature that I'm most interested in are the smart contracts that are supported by coins like Ethereum and NEO. These can make transactions safe, as they're programmatically evaluated via trustless compute. Aside from frivolous uses like cryptokitties and cryptomon, the most obvious use is to replace escrow companies - smart contracts make them unnecessary. That's just the start and the easy one though, because smart contracts are essentially just programs and are Turing complete (the decent implementations, anyways), you can set up trustless contracts for anything and to do anything. This has a lot of potential to be a disruptive financial instrument - there are a lot of middlemen who become less necessary with this technology. Trying to list all potential uses of smart contracts would be exhausting, not unlike listing all potential uses for a machine that does math really really fast.

There are also things like Kodak is doing, where the blockchain is used to establish ownership of assets. This can be done for anything that can have a digital representation.

Kodak's thing is actually a decent idea and a good potential use of this, so I'd put them into a different category than companies like the Long Blockchain Company (formerly Long Island Iced Tea) which is similar to the dotcom era fad of just adding ".com" to your company name for the moneys.

edit: I should give another use example: XRP (Ripple) has been growing quickly recently on the back of it's deals within the financial industry to use blockchain technology as a means to safely and quickly transfer value between institutions.